For those interested in issues such as climate change, social inequity, and the financial crisis, join me in a dialogue to explore the challenges and opportunities associated with sustainability and the role of business in a sustainable society.

Friday, October 14, 2011

Why Business Schools Should Join "Occupy Wall/Bay Street"

The Occupy Wall Street protests have ballooned into one of the most powerful grassroots social movements since the Great Depression and there doesn’t seem to be an end in sight.Once perceived by the elite to be a trivial display of immature angst by a bunch of hippies, the mainstream media has had no choice but to cover the protests to the chagrin of their corporate owners. For this protest, as Caplan and Grzyb explained, is of “the larger, ugly truths about modern capitalism” and as business professor Michael Porter explains, reflects the perception that corporations are “prospering at the expense of the broader community”. I think Finance Minister Jim Flaherty and Central Bank Governor Mark Carney overlook the broader message the protest is conveying when they focus on the financial crisis as the source of angst among protesters. I would argue that his was only the catalyst for a greater march against the inequities of the existing capitalist system. As Ed Clark, CEO of TD Bank said, "If you think this system is working for everyone, it's not".

So where are business schools in all of this?Naturally, business is expected to side with the right, defending their powerful position in society by putting forth rhetoric that touts the societal benefits of free markets such as job creation, access to cheap goods and services, and (perhaps taken to the extreme) individual freedom.Yet, I would argue as a business academic, perhaps paradoxically, that business schools should be an active voice in the protests not as a mouthpiece for the right but as a stark supporter of the need for change.

Here are three reasons why:

First, the last decade has proven unequivocally that Adam Smith’s original supposition that the pursuit of commercial interests leads to optimal gains for society is misguided at best. An unprecedented number of circumstances have emerged where the pursuit of corporate interest has left society worse off.Smith’s ingenuity presumed that business would make decisions using a moral lens and therefore fit a time when business represented a relatively small actor in society shadowing the power of the church and the state.Since then, we’ve seen business become the dominant societal actor with the power to not only ignore broader societal interests but to circumvent those interests.As I’ve written before, why should business be passive players responding to regulatory constraints or market demands when they can wield their growing power to influence regulation and what the market demands.To that end, many executives have essentially taken business school fundamentals to the extreme by deliberately shaping those environments to their liking with little regard for society.Wall Street’s active suppression of government regulation of derivatives and their relentless effort to defer risk to the public is one such example. Reducing these behaviors to "corporate greed", as many protesters have voiced to be the crux of their cause, overlooks the broader fundamental practices of our current economic system. So business schools, in my view, are obligated to occupy wall/bay street to voice the need for change in the fundamentals of the business discipline.

Second, I think it’s important to make sure that we don’t paint all businesses with the same brush.There are a growing number of companies, large and small, that define their purpose and operations on precisely what these protesters stand for: equality, human rights, and environmental sustainability.They adopt triple bottom line businesses with the purpose to co-create value along social, environmental, and economic systems not as isolated endeavors but as an integrated value proposition to society.Businesses like Grameen Bank, Interface, Patagonia, Better Place, Frogbox, Terracycle, and SEKEM represent the hope for business in a sustainable society.They are challenging the practices of those companies in the previous paragraph and redefining the purpose of business in society.Business schools should be marching to demonstrate their commitment to understanding these sorts of businesses and to build theories and frameworks that educate future managers to replicate this role.

Finally, any academic at a university is held to an obligation to engage in activity that advances new knowledge for the purpose of contributing to the welfare of broader society. If we’ve reached a stage in history where our business school teachings and research are partly responsible for the negative impacts on society, then is it not our duty to lead the charge in understanding what needs to change?One approach of business schools, which I presume is the most common, is to distance ourselves from the protest thereby further fueling the polarization of society.Another is to be part of the conversation so that we are truly doing our job as academics and understanding how the private sector can better respond to the needs of society.This takes a combination of courage and humility because it suggests that what we’ve taken for granted in the classroom and in our management journals might need radical change.

As a student at the school this professor works at I am appalled by the endorsement of these protests. Which ever way you lean these protests are not solving anything. They aim to disrupt commerce and that is not good for anyone. There is no tangible cause or goal. To say we're fighting for "equality" or "sustainability", without offering any tangible goal is difficult to fight against; it also gets us no where. Mike, you got one thing right in your blog that being an academic and a business person is a paradox. As an academic you might applaud the protests. You probably tell your students stuff like it's about "opening a dialogue" or some such rhetoric. The business side of your brain should be telling you that that holds no weight. There is no tangible issue and at the very least trying to be all things to all people is just bad business. These occupy protests are saying "Hey anyone with any grievance against society come join us". There are too many real issues to waste time lending any credibility to these occupiers.

As a student at the business school this professor works at I am extremely pleased to see such a progressive approach being adopted. The impact that businesses have on a global scale is reason to reflect on the grievances of the masses. Their aim is not to disrupt commerce, its to disrupt corruption.